Churn and dormancy are often used as the same word and measure different things. Churn is a customer who has ended: a cancelled contract, a closed account, a stated decision. Dormancy is a customer who has stopped ordering for longer than their own pattern predicts and has not yet been asked why. This page sets out the two definitions, the formula for each, which businesses have which, how dormancy turns into churn, and why the dormant list is the one that can still be acted on.
Two words for customers who are not buying. One describes a decision; the other describes a silence before one.
| Churn | Dormancy | |
|---|---|---|
| What it is | The relationship ended | Ordering stopped beyond the customer's own norm |
| Event | Cancellation, non-renewal, account closure | None; inferred from dates |
| Date known | Yes | The last order date; the dormancy date is computed |
| Who has it | Contract and subscription businesses | Every business with repeat customers |
| Formula | Customers or revenue lost ÷ customers or revenue at start | Customers past their threshold ÷ customers active in the prior year |
| Threshold | None needed | A multiple of each customer's typical gap |
| Recoverable | Rarely; it is a win-back | Often; it is a call |
| Cadence of reporting | Monthly or quarterly | Weekly |
Churn rate = customers, or recurring revenue, lost in the period ÷ customers, or recurring revenue, at the start
Dormant if days since last order > k × the customer's typical gap between orders Dormancy rate = dormant customers ÷ customers active in the prior year, by count and by prior value
Churn needs an event. Dormancy needs only order dates, which every business has.
In a contract business the sequence is visible afterwards:
| Month | What the data shows | State |
|---|---|---|
| −9 | Active seats fall from 80 to 60 | Usage dormancy beginning |
| −6 | Support tickets stop | Silence |
| −4 | No reply to the quarterly review invitation | Contact dormancy |
| −1 | Procurement asks for the contract end date | Too late |
| 0 | Non-renewal | Churn |
The churn is recorded in month zero. The dormancy was measurable nine months earlier. The renewal, retention and churn definitions cover the figures at the end of that sequence; the dormant list covers the start.
In a transactional business there is no month zero. A builder stops buying from a merchant and nothing is recorded anywhere. Twelve months later someone tidies the account list and the customer is marked inactive. What that business calls churn is dormancy plus an administrative decision, and its date is the date of the tidy-up.
| Business | Churn meaningful? | Dormancy meaningful? | Lead with |
|---|---|---|---|
| SaaS, subscriptions | Yes | Yes, as usage and contact dormancy | Dormancy weekly; churn quarterly |
| Managed services, telecoms | Yes, at contract end | Yes, in usage and orders for adds | Dormancy |
| Distribution, merchants, wholesale | Only by a declared rule | Yes | Dormancy |
| Trading desks | No | Yes: clients gone quiet where the desk has not | Dormancy |
| Professional firms | No; clients rarely cancel | Yes: no new matter in longer than the client's pattern | Dormancy |
| Insurance broking | Yes, at renewal | Partly: contact dormancy before renewal | Both |
| Customer | Prior-year revenue | Typical gap | Threshold | Days since last order | Owner | Last touch |
|---|---|---|---|---|---|---|
| A | $410,000 | 7 days | 18 | 41 | R. | 52 days ago |
| B | $95,000 | 30 days | 75 | 120 | S. | 9 days ago |
A has missed five orders and nobody has spoken to them in seven weeks. That row is the whole argument for leading with dormancy. The dormancy worked example builds the list by hand, and the Excel guide builds it in a spreadsheet.
Dormancy reported as churn. Customers written off while they can still be called.
Churn reported with no dormancy view. The figure moves; nobody saw it coming; the explanation is written afterwards.
A fixed threshold. Ninety days, which lists annual buyers and misses weekly ones.
Count without value. Two hundred dormant accounts worth 1 percent of revenue, given the same alarm as twenty worth 15.
Churn is the outcome; dormancy is the warning. Every business can measure dormancy from order dates alone, per customer against the customer's own cadence, and most churn passed through it months before. For what the rate should be, see what is a good dormancy rate. Covirage produces the dormant list weekly from the order export, ranked by prior value, with the owner and the last touch beside each name.
Only by declaring it. A distributor has no cancellation event, so churn is defined as dormant beyond some long threshold, such as four times the customer's typical gap, or twelve months. That is a useful reporting figure, but it is a rule applied to dormancy, not a separate event. State the rule beside the number.
Dormancy, weekly, as a list with names, prior revenue, days past the customer's own threshold and the owner. Churn is a quarterly figure for the board. By the time a customer appears in churn, the conversation that could have kept them was months ago.
No. Some paused for a reason: a seasonal business, a project that ended, a site that closed. That is why the threshold is per customer and why the list is a prompt to ask, not a verdict. The share of dormant accounts that reactivate after a call is itself worth tracking.